Housing myth we need to ditch

PARENTS of Australia, it's time to stop giving your kids attitude. They're in their 20s and, yes, they're closer to filling up their passport with stamps than they are to buying a house.

We get it. You "just wonder" if they'll "really think" that was a good idea "in 10 years". Those passive aggressive comments haven't passed unnoticed, and your progeny is well aware of your point.

But it's you who is wrong. The idea that an international holiday is some sort of luxury is outdated. An overseas holiday is not only cheap, but good value.

The next graph shows how the price of an international holiday has changed compared to the price of an owner occupied dwelling in Australia.

Houses have skyrocketed in recent years, while the cost of a trip has basically stayed the same — reducing in real terms because we’re earning more.

In the last 15 years holidays have risen in price by just 17 per cent. Buying a new house to live in has gone up by 64 per cent.

SAVE MONEY: BUY WHAT'S CHEAP

Now I know what you're going to say. You'll argue that the high price of houses just makes it even more important to save and not spend. But that way of looking at things is topsy-turvy. Every generation has taken recreation. They've done what was cheap at the time.

If your kids were jetting off to Bali in 1990, I'd agree, that's excessive. But it's not 1990 any more. I just checked the website of a well-known package holiday retailer, and a week away including flights and accommodation can cost well under a grand. I found eight nights in Thailand including flights for $595. Personally, that's too cheap for my liking. I'd worry about how many cockroaches would be sharing my bed.

But the kids are prudent and they are buying up these sort of package deals.

An all inclusive week in Thailand will now cost you less than an average week’s pay.

Previous generations went to the beach. This generation does the same, just in Thailand. The idea this is extravagant belongs to an era before relentless competition drove down the price of airfares (and cut service to the bare bones.)

When you look at ads for international holidays in the 1980s the numbers look similar to what you see now: $769, $970, $1019 for around a week in Singapore, Bangkok or Hong Kong. The following ad is from November 1987.

Thirty years ago a week in Asia was the equivalent of nearly a month’s wage.

That same 1987 newspaper had ads for houses on the front page. The prices range from $86,500 to $225,000. I guarantee the same homes cost 10 times more now.

Wages have risen a lot too. There's an ad for an "electrical tradesperson qualified in railways signalling" for $358 a week. That job would probably pay four or five times as much in 2016.

Because wages have risen a lot, saving for a holiday is not such a big deal any more. In 2017 the average full time adult makes $1600 a week and the average person makes $1180 a week. It's not that difficult to stash aside enough money to find yourself in an infinity pool in Bali.

Might the older generation even be a touch envious? While they could get their hands on a home, international holidays were genuinely out of reach. Seeing you tagged in photos of the lads' trip to Vietnam is probably giving them all sorts of feelings.

A HOUSE IS 1000 HOLIDAYS

A 20 per cent deposit on a $600,000 house is $120,000. It's a multi-year marathon just to qualify to get the loan. Paying it off may take the rest of your life.

A $480,000 loan on a 30 year mortgage means 360 monthly instalments of $2576, and you'll end up paying $450,000 in interest on top of the $480,00 in principal. (assuming a 5 per cent interest rate.). That's close enough to a million bucks.

Before you begin that utter slog, who can really begrudge you a break? Human beings work in cycles. Day and night. Week and weekend. Work and holiday. There's a reason we get four weeks leave a year, and it's because taking time off is good for us.

I decided to look up the medical research literature to see if there was any evidence that going on holiday was actually good for you. It didn't take long to confirm it.

This 2009 meta-analysis found "vacation has positive effects on health and wellbeing". This 2005 study said the positive effects were especially strong if you go somewhere warm and sunny, sleep well and meet new people.

So we need to park the intergenerational sniping over holidays. They're cheap and they're good for you. You only get one chance at making memories in your youth. If all your memories are of grinding away at saving, that might really be a cause for regret.